South Korea Q3 GDP rebounds but global headwinds raise uncertainty

SEOUL (Reuters) - South Korea's economic growth quickened in the third quarter led by private consumption and construction spending, but quarterly exports declined for the first time in a year in a sign of cooling global growth that should keep the door open for more monetary easing.

The economy grew a seasonally adjusted 0.9 per cent in the July-September quarter from the second, the Bank of Korea's advance estimates showed on Friday, compared to a 0.5 per cent rise in the second quarter and 0.9 percent growth in the first quarter.

The figure matched the median 0.9 per cent forecast in a Reuters survey of 21 analysts.

The data showed weaker sales abroad dampened spending on production equipment, suggesting a fragile economic recovery after growth slowed to its weakest pace in nearly two years in the June quarter - a view underscored by the central bank chief on Friday.

"South Korea is doing relatively well compared to other countries but growth is not yet firm," said Governor Lee Ju-yeol during a meeting with local conglomerate CEOs. "Despite questions on what may happen to household debt, we lowered rates because it was important we keep the spark of recovery alive."

Asia's fourth-largest economy is seen to have passed a trough in the second quarter when growth was hit by an April ferry sinking that killed hundreds of passengers, and dented domestic travel and spending.

But headwinds from slowing global growth could shackle the recovery.

The Bank of Korea has lowered interest rates by 50 basis points to a record-low 2.0 per cent in two moves this year in order to rekindle momentum.

Highlighting global uncertainties, Friday's data showed exports fell 2.6 per cent on-quarter in the first quarterly decline since the third quarter of 2013 when they dropped 1.1 percent.

A cooling Chinese economy and the threat of recession in Europe have raised doubts about global demand.

The Straits Times

We have been experiencing some problems with subscriber log-ins and apologise for the inconvenience caused. Until we resolve the issues, subscribers need not log in to access ST Digital articles. But a log-in is still required for our PDFs.